Ch08 Receivables

7/26/2019 Ch08 Receivables

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Chapter 8

Receivables

OBJECTIVES

Obj 1 Describe the common classifications of receivables.Obj 2 Describe the nature of and the accounting of uncollectible receivables.

Obj 3 Describe the direct write-off method of the accounting for uncollectible receivables.

Obj 4 Describe the allowance method of accounting for uncollectible receivables.

Obj 5 Comare the direct write-off and allowance methods of accounting for uncollectibleaccounts.

Obj ! Describe the nature" characteristics" and accounting of notes receivable.

Obj # Describe the reorting of receivables on the balance sheet.

QUESTION GRID

True/alse

N!

"

Ob#ective Di$$icult% N!" Ob#ective Di$$icult% N!" Ob#ective Di$$icult%

& $%-$1 &as' &' $%-$4 &as' (( $%-$! &as'

) $%-$1 &as' &8 $%-$4 (oderate (* $%-$! &as'

( $%-$1 &as' &+ $%-$4 (oderate (, $%-$! &as'

* $%-$1 &as' )- $%-$4 &as' (. $%-$! &as'

, $%-$1 &as' )& $%-$4 (oderate (' $%-$! &as'

. $%-$1 &as' )) $%-$4 (oderate (8 $%-$# &as'

' $%-$2 &as' )( $%-$4 &as' (+ $%-$# &as'

8 $%-$2 &as' )* $%-$4 &as' *- $%-)** (oderate+ $%-$3 &as' ), $%-$4 &as' *& $%-)** (oderate

&- $%-$3 &as' ). $%-$! &as' *) $%-)** (oderate

&& $%-$3 &as' )' $%-$! &as' *( $%-)** &as'

&) $%-$3 &as' )8 $%-$! &as' ** $%-)** &as'

&( $%-$4 &as' )+ $%-$! &as' *, $%-)** &as'

&* $%-$4 &as' (- $%-$! &as' *. $%-)** &as'

&, $%-$4 &as' (& $%-$! &as'

&. $%-$4 &as' () $%-$! &as'

4$1


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Chapter 8/Receivables 4$2

ultiple Ch!ice

N!

"

Ob#ective Di$$icult% N!" Ob#ective Di$$icult% N!" Ob#ective Di$$icult%

& $%-$1 &as' )' $%-$4 (oderate ,( $%-$! &as'

) $%-$1 &as' )8 $%-$4 (oderate ,* $%-$! (oderate

( $%-$1 &as' )+ $%-$4 &as' ,, $%-$! &as'* $%-$1 &as' (- $%-$4 (oderate ,. $%-$! (oderate

, $%-$1 &as' (& $%-$4 (oderate ,' $%-$! &as'

. $%-$2 &as' () $%-$4 (oderate ,8 $%-$! &as'

' $%-$2 &as' (( $%-$4 &as' ,+ $%-$! (oderate

8 $%-$2 &as' (* $%-$4 &as' .- $%-$! (oderate

+ $%-$2 &as' (, $%-$4 &as' .& $%-$! &as'

&- $%-$2 &as' (. $%-$4 (oderate .) $%-$! &as'

&& $%-$2 &as' (' $%-$4 (oderate .( $%-$! &as'

&) $%-$2 &as' (8 $%-$4 (oderate .* $%-$! &as'

&( $%-$3 &as' (+ $%-$4 (oderate ., $%-$! &as'

&* $%-$3 &as' *- $%-$4 &as' .. $%-$! (oderate

&, $%-$3 &as' *& $%-$4 &as' .' $%-$# &as'

&. $%-$3 (oderate *) $%-$4 (oderate .8 $%-$# &as'

&' $%-$4 (oderate *( $%-$4 (oderate .+ $%-$# &as'

&8 $%-$4 &as' ** $%-$4 (oderate '- $%-$# &as'

&+ $%-$4 (oderate *, $%-$4 (oderate '& $%-)** &as'

)- $%-$4 &as' *. $%-$4 &as' ') $%-)** &as'

)& $%-$4 (oderate *' $%-$4 &as' '( $%-)** (oderate

)) $%-$4 (oderate *8 $%-$4 &as' '* $%-)** (oderate

)( $%-$4 &as' *+ $%-$4 (oderate ', $%-)** (oderate

)* $%-$4 &as' ,- $%-$4 (oderate '. $%-)** (oderate), $%-$4 &as' ,& $%-$! &as' '' $%-)** Difficult

). $%-$4 &as' ,) $%-$! &as' '8 $%-)** (oderate

E0ercise/Other

N!

"

Ob#ectiv

e

Di$$icult% N!

"

Ob#ective Di$$icult

%

N!

"

Ob#ectiv

e

Di$$icult

%

& $%-$1 &as' 8 $%-$4 Difficult &, $%-$4 (oderate

) $%-$2 &as' + $%-$4 &as' &. $%-$4 &as'

( $%-$3 &as' &- $%-$4 (oderate

&' $%-$! (oderate

* $%-$3 &as' && $%-$4 (oderate

&8 $%-$# &as'

, $%-$3 &as' &) $%-$4 (oderate

&+ $%-$# &as'

. $%-$3+$4 &as' &( $%-$4 (oderate

)- $%-$# (oderate

' $%-$4 (oderate &* $%-$4 (oderate


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1r!ble2

N!

"

Ob#ective Di$$icult

%

N!" Ob#ective Di$$icult

%

N!

"

Ob#ectiv

e

Di$$icult

%

& $%-$3+$4+$# (oderate , $%-$# &as' + $%-$# (oderate

) $%-$4 Difficult . $%-$# &as' &- $%-)** Difficult( $%-$4 (oderate ' $%-$4+$# (oderat

e&& $%-)** (oderate

* $%-$! (oderate 8 $%-$# (oderate

Chapter 83Receivables

TRUE/45SE

1. ,otes receivable and accounts receivables can also be called trade receivables.

4NS6 D/0 &as' O0 $%-$1,)0 ))C )nal'tic )C*) /,-(easurement

2. eceivables from coman' owners and officers should be disclosed searatel' on the balance sheet.4NS6 D/0 &as' O0 $%-$1

,)0 ))C )nal'tic )C*) /,-(easurement

3. eceivables not currentl' collectible are reorted in the investments section of the balancesheet.


4. rade receivables occur when two comanies trade or e6change notes receivables.4NS6 / D/0 &as' O0 $%-$1,)0 ))C )nal'tic )C*) /,-(easurement

5. Other receivables include non trade receivables such as loans to coman' officers.4NS6 D/0 &as' O0 $%-$1,)0 ))C )nal'tic )C*) /,-(easurement

!. oth accounts receivable and notes receivable reresent claims that are e6ected to becollected in cash.


#. 7hen comanies sell their receivables to other comanies" the transaction is called factoring4NS6 D/0 &as' O0 $%-$2,)0 ))C )nal'tic )C*) /,-(easurement


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404 Chater %+eceivables

%. Of the two methods of accounting for uncollectible receivables" the allowance methodrovides in advance for uncollectible receivables.


8. 9enerall' acceted accounting rinciles do not normall' allow the use direct write-offmethod of accounting for uncollectible accounts.


1$. he direct write-off method records uncollectible accounts e6ense in the 'ear the secificaccount receivable is determined to be uncollectible.


11. )llowance for Doubtful )ccounts is debited under the direct write-off method when anaccount is determined to be uncollectible.4NS6 / D/0 &as' O0 $%-$3,)0 ))C )nal'tic )C*) /,-(easurement

12. :nder the direct write-off method" no attemt is made to match ad Debt &6ense to salesrevenues in the same accounting eriod.


13. he difference between )ccounts eceivable and its contra asset account is called net

reali;able value.4NS6 D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

14. he estimate based on sales method violates the matching rincile.4NS6 / D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

15. 7hen the estimate based on anal'sis of receivables is used" income is reduced when asecific receivable is written off.

4NS6 / D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

1!. 7hen an account receivable that has been written off is subse


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1#. )lthough )llowance for Doubtful )ccounts normall' has a credit balance" it ma' haveeither a debit or a credit balance before adjusting entries are recorded at the end of theaccounting eriod.

4NS6 D/0 &as' O0 $%-$4


1%. )t the end of a eriod" before the accounts are adjusted" )llowance for Doubtful )ccountshas a credit balance of =25$" and net sales on account for the eriod total =5$$"$$$. funcollectible accounts e6ense is estimated at 1> of net sales on account" the currentrovision to be made for uncollectible accounts e6ense is =4"#5$.

4NS6 / D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

18. )t the end of a eriod" before the accounts are adjusted" )llowance for Doubtful )ccountshas a debit balance of =5$$" and net sales on account for the eriod total =%$$"$$$. f

uncollectible accounts e6ense is estimated at 1> of net sales on account" the currentrovision to be made for uncollectible accounts e6ense is =%"5$$.4NS6 / D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

2$. )llowance for Doubtful )ccounts is a liabilit' account.4NS6 / D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

21. )t the end of a eriod" before the accounts are adjusted" )llowance for Doubtful )ccountshas a debit balance of =2"$$$. f the estimate of uncollectible accounts determined b' aging

the receivables is =3$"$$$" the current rovision to be made for uncollectible accountse6ense is =3$"$$$.4NS6 / D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

22. )t the end of a eriod" before the accounts are adjusted" )llowance for Doubtful )ccountshas a credit balance of =5"$$$. f the estimate of uncollectible accounts determined b' agingthe receivables is =5$"$$$" the current rovision to be made for uncollectible accountse6ense is =45"$$$.

4NS6 D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

23. 7hen using the estimate-based-on-sales method" the entr' to record uncollectible accountse6ense includes a credit to the )ccounts eceivable account.

4NS6 / D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement


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24. 7hen using the estimate based on anal'sis of receivables" the amount comuted in theanal'sis is alwa's the re" !$-da' note for =5"$$$ is =5"!$$.4NS6 / D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

28. he maturit' value of a note receivable is alwa's the same as its face value.4NS6 / D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

3$. he interest on a !>" !$-da' note for =5"$$$ is =3$$.4NS6 / D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

31. he art' romising to a' a note at maturit' is the a'ee.4NS6 / D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

32. f the ma?er of a note fails to a' the debt on the due date" the note is said to be dishonored.4NS6 D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

33. 7hen a note is received from a customer on account" it is recorded b' debiting )ccountseceivable and crediting ,otes eceivable.

4NS6 / D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement


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Chapter 8/Receivables 4$#

34. n comuting the maturit' date of a note" the date the note is issued is included but the duedate is omitted.


35. 7hen a note is written to settle an oen account no entr' is necessar'.4NS6 / D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

3!. f a romissor' note is dishonored" the a'ee should 7!trecord interest income.4NS6 / D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

3#. he receivables turnover ratio is comuted b' dividing total gross sales b' the average netreceivables during the 'ear.


3%. he balance of the allowance for doubtful accounts is added to accounts receivable on thebalance sheet.

4NS6 / D/0 &as' O0 $%-$#,)0 ))C )nal'tic )C*) /,-(easurement

38. he accounts receivable turnover measures the length of time in da's it ta?es to collect areceivable.

4NS6 / D/0 &as' O0 $%-$#


4$. ) !$-da'" 12> note receivable for =2$"$$$" dated (a' 2$" is discounted at the ban? on une8 at 15>. he number of da's in the discount eriod is 2$.

4NS6 / D/0 (oderate O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

41. ) !$-da'" 12> note receivable for =2$"$$$" dated (a' 2$" is discounted at the ban? on une8 at 15>. he roceeds are =2$"34$.

4NS6 / D/0 (oderate O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

42. f the roceeds from discounting a note receivable are less than the face value of the note"nterest &6ense will be debited for the e6cess of the roceeds over the face value.

4NS6 D/0 (oderate O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement


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43. he discounting of a note receivable creates a contingent liabilit' that continues in effectuntil the due date of the note.

4NS6 D/0 &as' O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

44. ) note receivable can be sold to a financial institution to secure cash before the maturit'date. his t'e of transaction is called discounting the note receivable.

4NS6 D/0 &as' O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

45. he amount of cash received for a discounted noted is called maturit' value.4NS6 / D/0 &as' O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

4!. he roceeds received from discounting a note receivable at a ban? are e


9/42


4. ,otes or accounts receivables that result from sales transactions are often calleda. non-trade receivables.b. trade receivables.c. merchandise receivables.

d. sales receivables.4NS6 D/0 &as' O0 $%-$1,)0 ))C )nal'tic )C*) /,-(easurement

5. he term BreceivablesB includes alla. mone' claims against other entities.b. merchandise to be collected from individuals or comanies.c. cash to be aid to creditors.d. cash to be aid to debtors.

4NS6 ) D/0 &as' O0 $%-$1,)0 ))C )nal'tic )C*) /,-(easurement

!. 7hen does an account become uncollectiblea. when the debtor fails to a' an account according to a sales contractb. when the debtor fails to a' a note on the due datec. there is no general rule for when an account becomes uncollectibled. at the end of the fiscal 'eare. uon receit of a certified letter from the debtor

4NS6 C D/0 &as' O0 $%-$2,)0 ))C )nal'tic )C*) /,-(easurement

#. he t'e of account and normal balance of )llowance for Doubtful )ccounts is

a. contra asset" creditb. asset" debitc. liabilit'" creditd. e6ense" debite. e6ense" credit


%. he two methods of accounting for uncollectible receivables are the allowance method andthea. e


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8. he direct write-off method of accounting for uncollectible accountsa. emhasi;es balance sheet relationshis.b. is not generall' acceted as a basis for estimating bad debts.c. emhasi;es cash reali;able value.

d. emhasi;es the matching of e6enses with revenues.4NS6 D/0 &as' O0 $%-$2,)0 ))C )nal'tic )C*) /,-(easurement

1$. :nder the direct write-off method of accounting for uncollectible accounts" ad Debts&6ense is debiteda. at the end of each accounting eriod.b. when a credit sale is ast due.c. whenever a re-determined amount of credit sales have been made.d. when an account is determined to be worthless.

4NS6 D D/0 &as' O0 $%-$2


11. )n alternative name for ad Debts &6ense isa. Collection &6ense.b. Credit Eoss &6ense.c. :ncollectible )ccounts &6ense.d. Deadbeat &6ense.


12. wo methods of accounting for uncollectible accounts are the

a. direct write-off method and the allowance method.b. allowance method and the accrual method.c. allowance method and the net reali;able method.d. direct write-off method and the accrual method.


13. f the direct write-off method of accounting for uncollectible receivables is used" whatgeneral ledger account is debited to write off a customerFs account as uncollectiblea. :ncollectible )ccounts *a'ableb. )ccounts eceivablec. )llowance for Doubtful )ccountsd. ad Debt &6ense

4NS6 D D/0 &as' O0 $%-$3,)0 ))C )nal'tic )C*) /,-(easurement


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Chapter 8/Receivables 411

14. f the direct write-off method of accounting for uncollectible receivables is used" whatgeneral ledger account is credited to write off a customerFs account as uncollectiblea. :ncollectible )ccounts &6enseb. )ccounts eceivable

c. )llowance for Doubtful )ccountsd. nterest &6ense4NS6 D/0 &as' O0 $%-$3,)0 ))C )nal'tic )C*) /,-(easurement

15. One of the wea?nesses of the direct write-off method is that ita. understates accounts receivable on the balance sheetb. violates the matching rincilec. is too difficult to use for man' comaniesd. is based on estimates

4NS6 D/0 &as' O0 $%-$3


1!. he E(, Co. uses the direct write-off method of accounting for uncollectible accountsreceivable. he entr' to write off an account that has been determined to be uncollectiblewould be as follows0a. debit )llowance for Doubtful )ccountsG credit )ccounts eceivableb. debit ales eturns and )llowance" credit )ccounts eceivablec. debit :ncollectible )ccounts &6enseG credit )llowance for Doubtful )ccountsd. debit )ccounts eceivable" credit :ncollectible )ccounts &6ensee. debit :ncollectible )ccounts &6enseG credit )ccounts eceivable

4NS6 & D/0 (oderate O0 $%-$3


1#. )llowance for Doubtful )ccounts has a credit balance of =5$$ at the end of the 'ear @beforeadjustmentA" and uncollectible accounts e6ense is estimated at 3> of net sales. f net salesare =!$$"$$$" the amount of the adjusting entr' to record the rovision for doubtful accountsisa. =1%"5$$b. =1#"5$$c. =1%"$$$d. none of the above

4NS6 C D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement


12/42


1%. :nder the allowance method" writing off an uncollectible accounta. affects onl' income statement accounts.b. is not accetable ractice.c. affects onl' balance sheet accounts.

d. affects both balance sheet and income statement accounts.4NS6 C D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

18. )n estimate based on an anal'sis of receivables shows that =#%$ of accounts receivables areuncollectible. he )llowance for Doubtful )ccounts has a debit balance of =11$. )fterrearing the adjusting entr' at the end of the 'ear" the balance in the )llowance forDoubtful )ccounts isa. =11$b. =#%$c. =!#$

d. =%8$4NS6 D D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

2$. f the allowance method of accounting for uncollectible receivables is used" what generalledger account is debited to write off a customerFs account as uncollectiblea. :ncollectible )ccounts &6enseb. )llowance for Doubtful )ccountsc. )ccounts eceivabled. nterest &6ense

4NS6 D/0 &as' O0 $%-$4


21. )llowance for Doubtful )ccounts has a credit balance of =%$$ at the end of the 'ear @beforeadjustmentA" and an anal'sis of accounts in the customers ledger indicates doubtful accountsof =15"$$$. 7hich of the following entries records the roer rovision for doubtfulaccountsa. debit :ncollectible )ccounts &6ense" =%$$G credit )llowance for Doubtful )ccounts"

=%$$b. debit :ncollectible )ccounts &6ense" =14"2$$G credit )llowance for Doubtful )ccounts"

=14"2$$c. debit )llowance for Doubtful )ccounts" =%$$G credit :ncollectible )ccounts &6ense"

=%$$d. debit )llowance for Doubtful )ccounts" =15"%$$G credit :ncollectible )ccounts &6ense"

=15"%$$4NS6 D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement


13/42


22. )llowance for Doubtful )ccounts has a debit balance of =5$$ at the end of the 'ear @beforeadjustmentA" and uncollectible accounts e6ense is estimated at 3> of net sales. f net salesare =!$$"$$$" the amount of the adjusting entr' to record the rovision for doubtful accountsis

a. =1%"5$$b. =1#"5$$c. =1%"$$$d. none of the above

4NS6 C D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

23. )fter the accounts are adjusted and closed at the end of the fiscal 'ear" )ccounts eceivablehas a balance of =45$"$$$ and )llowance for Doubtful )ccounts has a balance of =25"$$$.7hat is the net reali;able value of the accounts receivablea. =25"$$$

b. =425"$$$c. =45$"$$$d. =455"$$$


24. f the allowance method of accounting for uncollectible receivables is used" what generalledger account is credited to write off a customerFs account as uncollectiblea. :ncollectible )ccounts &6enseb. )ccounts eceivablec. )llowance for Doubtful )ccounts

d. nterest &6ense4NS6 D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

25. )llowance for Doubtful )ccounts is listed on the balance sheet under the cationa. stoc?holdersH e


14/42


2!. On the balance sheet" the amount shown for the )llowance for Doubtful )ccounts is e


15/42


3$. ) coman' uses the estimate of sales method to account for uncollectible accounts. 7henthe firm writes off a secific customerFs account receivablea. total current assets are reducedb. total e6enses for the eriod are increased

c. total current assets are reduced and total e6enses are increasedd. there is no effect on total current assets or total e6enses4NS6 D D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

31. )n estimate based on an anal'sis of receivables shows that =#%$ of accounts receivables areuncollectible. he )llowance for Doubtful )ccounts has a debit balance of =11$. )fterrearing the adjusting entr' at the end of the 'ear" the balance in the :ncollectible)ccounts &6ense isa. =11$b. =#%$

c. =!#$d. =%8$4NS6 D D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

32. )C coman' uses the estimate of sales method of accounting for uncollectible accounts.)C estimates that 3> of all credit sales will be uncollectible. On anuar' 1" 2$$5" the)llowance for Doubtful )ccounts had a credit balance of =2"4$$. During 2$$5" )C wrote-off accounts receivable totaling =1"%$$ and made credit sales of =1$$"$$$. )fter theadjusting entr'" the December 31" 2$$5" balance in the :ncollectible )ccounts &6ensewould be

a. =1"2$$b. =3"$$$c. =3"!$$d. =#"2$$

4NS6 D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

33. he balance in )llowance for Doubtful )ccounts must be carefull' considered rior to theend of the 'ear adjustment when al'ing which methoda. direct write-off methodb. estimate based on salesc. estimate based on an anal'sis of receivablesd. both @bA and @cA



16/42


34. Donovan Coman' uses the estimate based on anal'sis of receivables to account foruncollectible accounts. he coman' has determined that the rish Coman' account isuncollectible. o write-off this account" Donovan should debita. :ncollectible )ccounts &6ense and credit )ccounts eceivable

b. :ncollectible )ccounts &6ense and credit )llowance for Doubtful )ccountsc. )llowance for Doubtful )ccounts and credit )ccounts eceivabled. )ccounts receivable and credit )llowance for Doubtful )ccounts


35. :sing the estimate based on sales method of accounting for uncollectible accounts" the entr'to reinstate a secific receivable reviousl' written off would include aa. credit to ad Debt &6enseb. credit to )ccounts eceivablec. debit to )llowance for Doubtful )ccounts

d. debit to )ccounts eceivable4NS6 D D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

3!. )t the beginning of the 'ear" the balance in the )llowance for Doubtful )ccounts is a creditof =54$. During the 'ear" =35$ of reviousl' written-off accounts were reinstated andaccounts totaling =41$ are written-off as uncollectible. he end of the 'ear balance in the)llowance for Doubtful )ccounts should bea. =35$b. =41$c. =4%$

d. =!$$4NS6 C D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

3#. )llowance for Doubtful )ccounts has a debit balance of =%$$ at the end of the 'ear @beforeadjustmentA" and an anal'sis of accounts in the customers ledger indicates doubtful accountsof =15"$$$. 7hich of the following entries records the roer rovision for doubtfulaccountsa. debit :ncollectible )ccounts &6ense" =%$$G credit )llowance for Doubtful )ccounts"

=%$$b. debit :ncollectible )ccounts &6ense" =14"2$$G credit )llowance for Doubtful )ccounts"

=14"2$$c. debit )llowance for Doubtful )ccounts" =%$$G credit :ncollectible )ccounts &6ense"

=%$$d. debit :ncollectible )ccounts &6ense" =15"%$$G credit )llowance for Doubtful )ccounts"

=15"%$$4NS6 D D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement


17/42

Chapter 8/Receivables 41#

3%. )llowance for Doubtful )ccounts has a debit balance of =1"1$$ at the end of the 'ear@before adjustmentA" and an anal'sis of customersF accounts indicates doubtful accounts of=12"8$$. 7hich of the following entries records the roer rovision for doubtful accountsa. debit :ncollectible )ccounts &6ense" =14"$$$G credit )llowance for Doubtful )ccounts"

=14"$$$b. debit )llowance for Doubtful )ccounts" =14"$$$G credit :ncollectible )ccounts &6ense"=14"$$$

c. debit )llowance for Doubtful )ccounts" =11"%$$G credit :ncollectible )ccounts &6ense"=11"%$$

d. debit :ncollectible )ccounts &6ense" =11"%$$G credit )llowance for Doubtful )ccounts"=11"%$$

4NS6 ) D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

38. )llowance for Doubtful )ccounts has a credit balance of =1"5$$ at the end of the 'ear

@before adjustmentA" and an anal'sis of customersF accounts indicates doubtful accounts of=1#"8$$. 7hich of the following entries records the roer rovision for doubtful accountsa. debit )llowance for Doubtful )ccounts" =1!"4$$G credit :ncollectible )ccounts &6ense"

=1!"4$$b. debit )llowance for Doubtful )ccounts" =18"4$$G credit :ncollectible )ccounts &6ense"

=18"4$$c. debit :ncollectible )ccounts &6ense" =18"4$$G credit )llowance for Doubtful )ccounts"

=18"4$$d. debit :ncollectible )ccounts &6ense" =1!"4$$G credit )llowance for Doubtful )ccounts"

=1!"4$$4NS6 D D/0 (oderate O0 $%-$4


4$. 7hen the allowance method is used to account for uncollectible accounts" ad Debts&6ense is debited whena. a customerFs account becomes ast due.b. an account becomes bad and is written off.c. a sale is made.d. management estimates the amount of uncollectibles.

4NS6 D D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

41. he collection of an account that had been reviousl' written off under the allowancemethod of accounting for uncollectiblesa. will increase income in the eriod it is collected.b. will decrease income in the eriod it is collected.c. does not affect income in the eriod it is collected.d. re


18/42


42. )n aging of a coman'Fs accounts receivable indicates that =4"$$$ are estimated to beuncollectible. f )llowance for Doubtful )ccounts has a =1"2$$ credit balance" theadjustment to record bad debts for the eriod will re


19/42


4!. o record estimated uncollectible accounts using the allowance method" the adjusting entr'would be aa. debit to ad Debts &6ense and a credit to )llowance for Doubtful )ccounts.b. debit to )ccounts eceivable and a credit to )llowance for Doubtful )ccounts.

c. debit to )llowance for Doubtful )ccounts and a credit to )ccounts eceivable.d. debit to Eoss on Credit ales and a credit to )ccounts eceivable.4NS6 ) D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

4#. he balance in )llowance for Doubtful )ccounts must be considered rior to end of eriodadjustment when using which of the following methodsa. )nal'sis of receivables allowance methodb. Direct write-off methodc. )ccrual methodd. ,et reali;able method


4%. Iou have just received notice that a customer of 'ours with an )ccount eceivable balanceof =1$$ has gone ban?rut and will 7!tma?e an' future a'ments. )ssuming 'ou use theallowance method" the entr' 'ou ma?e is toa. debit ad Debt &6ense and credit )llowance for Doubtful )ccounts.b. debit ad Debt &6ense and credit )ccounts eceivable.c. debit )llowance for Doubtful )ccounts and credit )ccounts eceivable.d. debit )llowance for Doubtful )ccounts and credit ad Debt &6ense.

4NS6 C D/0 &as' O0 $%-$4


48. anning Coman' uses the ercentage of receivables method for recording bad debtse6ense. he accounts receivable balance is =2$$"$$$ and credit sales are =1"$$$"$$$. )naging of accounts receivable shows that 5> will be uncollectible. 7hat adjusting entr' will(anning Coman' ma?e if the )llowance for Doubtful )ccounts has a credit balance of=2"$$$ before adjustmenta. ad Debts &6ense %"$$$

)llowance for Doubtful )ccounts %"$$$b. ad Debts &6ense 1$"$$$

)llowance for Doubtful )ccounts 1$"$$$c. ad Debts &6ense %"$$$

)ccounts eceivable %"$$$d. ad Debts &6ense 1$"$$$

)ccounts eceivable 1$"$$$4NS6 ) D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement


20/42


5$. :nder the allowance method" when a 'ear-end adjustment is made for estimateduncollectible accountsa. Eiabilities decrease.b. ,et ncome is unchanged.

c. otal )ssets are unchanged.d. otal )ssets decrease.4NS6 D D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

51. he amount of a romissor' note is called thea. reali;able valueb. maturit' valuec. face valued. roceeds

4NS6 C D/0 &as' O0 $%-$!


52. he amount of the romissor' note lus the interest earned on the due date is called thea. reali;able valueb. maturit' valuec. face valued. net reali;able value

4NS6 D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

53. ) !$-da'" 1$> note for =%"$$$" dated )ril 15" is received from a customer on account. he

face value of the note isa. =%"!$$b. =#"2$$c. =%"%$$d. =%"$$$

4NS6 D D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

54. ) 8$-da'" 12> note for =1$"$$$" dated (a' 1" is received from a customer on account. hematurit' value of the note isa. =1$"$$$b. =1$"3$$c. =45$d. =8"55$

4NS6 D/0 (oderate O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement


21/42


55. nterest on a note can be calculated without ?nowledge of thea. noteFs maturit' dateb. rate of interestc. notes duration

d. rincial amount4NS6 ) D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

5!. On ,ovember 1" la;er Coman' receives a !> interest bearing note from am Coman'to settle a =2$"$$$ account receivable. he note is due in si6 months. )t December 31"la;er should record interest revenue ofa. =$b. =1$$c. =2$$d. =!$$

4NS6 C D/0 (oderate O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

5#. f the ma?er of a romissor' note fails to a' the note on the due date" the note is said to bea. dislacedb. disallowedc. dishonoredd. discounted

4NS6 C D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

5%. he journal entr' to record a note received from a customer to al' on account isa. debit ,otes eceivableG credit )ccounts eceivableb. debit )ccounts eceivableG credit ,otes eceivablec. debit CashG credit ,otes eceivabled. debit ,otes eceivableG credit ,otes *a'able

4NS6 ) D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

58. ) =!"$$$" 3$-da'" 12> note recorded on ,ovember 21 is not aid b' the ma?er at maturit'.he journal entr' to recogni;e this event isa. debit Cash" =!"$!$G credit ,otes eceivable" =!"$!$b. debit )ccounts eceivable" =!"$!$G credit ,otes eceivable" =!"$$$G Credit nterest

eceivable" =!$c. debit ,otes eceivable" =!"$!$G credit )ccounts eceivable" =!"$!$d. debit )ccounts eceivable" =!"$!$G credit ,otes eceivable" =!"$$$G Credit nterest

evenue" =!$4NS6 D D/0 (oderate O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement


22/42


!$. On ,ovember 1" Jim Coman' acceted a 3-month note receivable as a'ment for servicesrovided to Chu Coman'. he terms of the note were =%"$$$ face value and !> interest.Jim Coman' closes its boo?s at December 31 and does not use reversing entries. On/ebruar' 1" the journal entr' to record the collection of the note should include a credit to

a. ,otes eceivable for =%"12$b. nterest eceivable for =12$c. nterest evenue for =12$d. nterest evenue for =4$

4NS6 D D/0 (oderate O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

!1. ) note receivable or romissor' notea. has the art' to whom the mone' is due as the ma?er.b. is not a formal credit instrument.c. cannot be factored to another art'.

d. ma' be used to settle an accounts receivable.4NS6 D D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

!2. 7hen a coman' receives an interest-bearing note receivable" it willa. debit ,otes eceivable for the maturit' value of the note.b. debit ,otes eceivable for the face value of the note.c. credit ,otes eceivable for the maturit' value of the note.d. credit ,otes eceivable for the face value of the note.

4NS6 D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

!3. *ane Coman' receives a =3"$$$" 3-month" !> romissor' note from Dag Coman' insettlement of an oen accounts receivable. 7hat entr' will *ane Coman' ma?e uonreceiving the notea. ,otes eceivable 3"$$$

)ccounts eceivableKDag Coman' 3"$$$b. ,otes eceivable 3"$45

)ccounts eceivableKDag Coman' 3"$45c. ,otes eceivable 3"$45

)ccounts eceivableKDag Coman' 3"$$$ nterest evenue 45

d. ,otes eceivable 3"$$$ nterest eceivable 45 )ccounts eceivableKDag Coman' 3"$$$ nterest evenue 45

4NS6 ) D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement


23/42


!4. he maturit' value of a =2$"$$$" 8>" 4$-da' note receivable dated ul' 3 isa. =2$"$$$.b. =2$"2$$.c. =21"%$$.

d. =22"$$$.4NS6 D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

!5. Larer Coman' lends Lewell Coman' =2$"$$$ on (arch 1" acceting a four-month" !>interest note. Larer Coman' reares financial statements on (arch 31. 7hat adjustingentr' should be made before the financial statements can be reareda. Cash 1$$

nterest evenue 1$$b. nterest eceivable 3$$

nterest evenue 3$$

c. nterest eceivable 1$$ nterest evenue 1$$d. ,ote eceivable 2$"$$$

Cash 2$"$$$4NS6 C D/0 &as' O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

!!. right Co. holds *ar? Co.Hs =2$"$$$" 12$ da'" 8> note. he entr' made b' right Co. whenthe note is collected" assuming no interest has reviousl' been accrued is0a. Cash 2$"$$$

,otes eceivable 2$"$$$

b. )ccounts eceivable 2$"!$$ ,otes eceivable 2$"$$$ nterest evenue !$$

c. Cash 2$"!$$ ,otes eceivable 2$"$$$ nterest evenue !$$

d. )ccounts eceivable 2$"!$$ ,otes evenue 2$"$$$ nterest evenue !$$

4NS6 C D/0 (oderate O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

!#. eceivables are usuall' listed on the balance sheet after Cash in what ordera. )ccounts eceivable" ,otes eceivable" nterest eceivableb. nterest eceivable" ,otes eceivable" )ccounts eceivablec. ,otes eceivable" nterest eceivable" )ccounts eceivabled. ,otes eceivable" )ccounts eceivable" nterest eceivable

4NS6 D D/0 &as' O0 $%-$#,)0 ))C )nal'tic )C*) /,-(easurement


24/42


!%. eceivables are usuall' listed in ordera. of the due dateb. of the si;ec. alhabeticall'

d. of li


25/42


#3. ) !$-da'" 12> note for =1$"$$$" dated (a' 1" is received from a customer on account. fthe note is discounted on (a' 21 at 15>" the roceeds area. =1#$b. =8"%3$

c. =1$"$$$d. =1$"$3$4NS6 D D/0 (oderate O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

#4. ) !$-da'" 12> note for =1$"$$$" dated (a' 1" is received from a customer on account. fthe note is discounted on une 1$ at 15>" the roceeds area. =1$"115b. =1$"2$$c. =1$"$$$d. =1$"$3$

4NS6 ) D/0 (oderate O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

#5. ) !$-da'" 12> note for =1$"$$$" dated (a' 1" is received from a customer on account. fthe note is discounted on (a' 21 at 15>" the amount of interest revenue or e6ense to berecorded b' the a'ee of the note on (a' 21 isa. =3$ interest e6enseb. =3$ interest revenuec. =1#$ interest revenued. =1#$ interest e6ense

4NS6 D/0 (oderate O0 $%-)


#!. ) !$-da'" 12> note received from a customer for =5$"$$$" dated (a' 15" is endorsed to theban? on (a' 25" and the ban? discounts the note at 15>. f the note is dishonored b' thema?er and the ban? charges a =2$ rotest fee" what is the amount a'able to the ban? onul' 14a. =51"$$$b. =51"$2$c. =5!"$2$d. =5$"$$$

4NS6 D/0 (oderate O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement


26/42


##. ) 8$-da'" 12> note for =2$"$$$" dated )ril 1$" is received from a customer on account. fthe note is discounted at 15> on (a' 1$" the due date isa. ul' 8b. ul' 1$

c. ul' 11d. ul' %4NS6 ) D/0 Difficult O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

#%. ) 8$-da'" 12> note for =2$"$$$" dated )ril 1$" is received from a customer on account. fthe note is discounted at 15> on (a' 1$" the da's in the discount eriod area. !$b. 8$c. 12$d. 3$

4NS6 ) D/0 (oderate O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

E9ERCISE/OTER

1. Other than accounts receivable and notes receivable" name other receivables that might beincluded in the general ledger.

4NS6

nterest eceivable" eceivables from Officers or &mlo'ees" a6es eceivable.D/0 &as' O0 $%-$1,)0 ))C )nal'tic )C*) /,-(easurement

2. f sales ersonnel are allowed to arove customer credit" how might the cost of arovingoor credit ris? be controlled

4NS6

)llow sales ersonnel to arove customer credit for onl' sales of small amounts.D/0 &as' O0 $%-$2,)0 ))C )nal'tic )C*) /,-(easurement

3. On (arch 31st the coman' determines that it needs to recogni;e =1"85$.$$ in uncollectibleaccounts e6ense based on an evaluation of accounts receivable. ournali;e this recognition.

4NS6

(ar 31st :ncollectible )ccounts &6ense 1"85$.$$ )llowance for Doubtful )ccounts 1"85$.$$

D/0 &as' O0 $%-$2,)0 ))C )nal'tic )C*) /,-(easurement


27/42


4. ournali;e the following transaction using the direct write-off method of accounting foruncollectible receivables.

une 1$ eceived =1"3$$ from an Downs and wrote off the remainder owed of =4"2$$.

Oct. 11 einstated the account of an Downs and received =4"2$$ cash in full a'ment.4NS6

une 1$ Cash 1"3$$

ad Debt &6ense 4"2$$

)ccounts eceivable-an Downs 5"5$$

Oct 11 )ccounts eceivable-an Downs 4"2$$


11 Cash 4"2$$


D/0 &as' O0 $%-$3,)0 ))C )nal'tic )C*) /,-(easurement O*0 &6amle &6ercise %-1

5. (ega tamers utili;es the direct write-off method for accounts receivable. On etember15th it is notified b' the attorne's for Lub Ca en that Lub Ca en is ban?rut and nocash is e6ected in the li


28/42


D/0 &as' O0 $%-$3 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

#. Determine the amount to be added to )llowance for Doubtful )ccounts in each of the

following cases. ndicate the ending balance in each case.

@aA Credit balance of =4$$ in the allowance account just rior to adjustment. )nal'sisof accounts receivable indicates doubtful accounts of =%"5$$.

@bA Credit balance of =4$$ in the allowance account just rior to adjustment.:ncollectible accounts are estimated at 2> of sales" which totaled =1"$$$"$$$ forthe 'ear.

4NS6

@aA =%"1$$ and =%"5$$@bA =2$"$$$ and =2$"4$$

D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

%. (ega ales has 9ross sales of =1"525"$$$.$$. Of these sales" =1"1#5"$$$.$$ were onaccounts receivable. During the 'ear of 2$$# there were sales returns and allowances andsales discounts on sales made on account of =55"$$$.$$. (ega ales calculates that ! 1+2>of the eriod sales less sales returns and allowances and sales discounts will beuncollectible.

Calculate the net reali;able value of sales and write the journal entr' to recogni;e the eriod

e6ense of uncollectible accounts.4NS6

*eriod credit sales =1"1#5"$$$

Eess sales returns" allowances" and discounts 55"$$$

,et sales on account =1"12$"$$$

*ercentage estimate for uncollectibles ! 1+2>

)mount calculated to be uncollectible =#2"%$$.$$

Dec 31" 2$$# :ncollectible )ccounts &6ense #2"%$$.$$ )llowance for Doubtful )ccounts #2"%$$.$$

D/0 Difficult O0 $%-$4



29/42


8. ournali;e the following transactions using the allowance method of accounting foruncollectible receivables.

une 1$ eceived =1"3$$ from an Downs and wrote off the remainder owed of =4"2$$.

Oct. 11 einstated the account of an Downs and received =4"2$$ cash in full a'ment.4NS6

une 1$ Cash 1"3$$

)llowance for Doubtful )ccounts 4"2$$


Oct 11 )ccounts eceivable-an Downs 4"2$$


11 Cash 4"2$$


D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement O*0 &6amle &6ercise %-2

1$. )t the end of the current 'ear" )ccounts eceivable has a balance of =#$$"$$$G )llowancefor Doubtful )ccounts has a credit balance of =5"5$$G and net sales for the 'ear total=2"5$$"$$$. ad Debt &6ense is estimated at 1+2 of 1> of net sales.

Determine @aA the amount of the adjusting entr' for uncollectible accountsG @bA the adjustedbalances of )ccounts eceivable" )llowance of Doubtful )ccountsG and ad Debt &6enseG

and @cA the net reali;able value of accounts receivable.4NS6

@aA =12"5$$ @=2"5$$"$$$ .$$5A

)djusted alance

@bA )ccounts eceivable =#$$"$$$

)llowance for Doubtful )ccounts @=5"5$$ M =12"5$$A 1%"$$$


@cA ,et reali;able value @ =#$$"$$$ - =1%"$$$A =!%2"$$$

D/0 (oderate O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement O*0 &6amle &6ercise %-3


30/42


11. )t the end of the current 'ear" )ccounts eceivable has a balance of =8$$"$$$G )llowancefor Doubtful )ccounts has a credit balance of =3"5$$G and net sales for the 'ear total=3"$$$"$$$. ad Debt &6ense is estimated at 1+2 of 1> of net sales.

Determine @aA the amount of the adjusting entr' for uncollectible accountsG @bA the adjustedbalances of )ccounts eceivable" )llowance of Doubtful )ccountsG and ad Debt &6enseGand @cA the net reali;able value of accounts receivable.

4NS6

@aA =15"$$$ @=3"$$$"$$$ .$$5A

)djusted alance

@bA )ccounts eceivable =8$$"$$$

)llowance for Doubtful )ccounts @=3"5$$ M =15"$$$A 1%"5$$

ad Debt &6ense 15"$$$

@cA ,et reali;able value @ =8$$"$$$ - =1%"5$$A =%%1"5$$


12. )t the end of the current 'ear" )ccounts eceivable has a balance of =#$$"$$$G )llowancefor Doubtful )ccounts has a credit balance of =5"5$$G and net sales for the 'ear total=2"5$$"$$$. :sing the aging method" the balance of )llowance for Doubtful )ccounts isestimated as =25"$$$.



@aA =18"5$$ @=25"$$$ -=5"5$$A

)djusted alance

@bA )ccounts eceivable =#$$"$$$

)llowance for Doubtful )ccounts @=5"5$$ M =18"5$$A 25"$$$


@cA ,et reali;able value @ =#$$"$$$ - =25"$$$A =!#5"$$$



31/42


13. )t the end of the current 'ear" )ccounts eceivable has a balance of =%$$"$$$G )llowancefor Doubtful )ccounts has a credit balance of =3"5$$G and net sales for the 'ear total=3"$$$"$$$. ad Debt &6ense is estimated at 1+2 of 1> of net sales.

Determine @aA the amount of the adjusting entr' for uncollectible accountsG @bA the adjustedbalances of )ccounts eceivable" )llowance of Doubtful )ccountsG and ad Debt &6enseGand @cA the net reali;able value of accounts receivable.

4NS6

@aA =15"$$$ @=3"$$$"$$$ .$$5A

)djusted alance

@bA )ccounts eceivable =%$$"$$$

)llowance for Doubtful )ccounts @=3"5$$ M 15"$$$A 1%"5$$

ad Debt &6ense 15"$$$

@cA ,et reali;able value @ =%$$"$$$ - =1%"5$$A =#%1"5$$


14. )t the end of the current 'ear" )ccounts eceivable has a balance of =8$$"$$$G )llowancefor Doubtful )ccounts has a credit balance of =3"5$$G and net sales for the 'ear total=3"$$$"$$$. :sing the aging method" the balance of )llowance for Doubtful )ccounts isestimated to be =35"$$$.



@aA =31"5$$ @=35"$$$ -=3"5$$A

)djusted alance

@bA )ccounts eceivable =8$$"$$$

)llowance for Doubtful )ccounts @=3"5$$ M =31"5$$A 35"$$$


@cA ,et reali;able value @ =8$$"$$$ - =35"$$$A =%!5"$$$



32/42


15. (ega tamers utili;es the allowance for doubtful accounts method for accounts receivablethat are deemed uncollectible. On December 12th it is notified b' /anc' 7heels and iresthat it is submitting =2#5.$$ in settlement of its =55$.$$ outstanding accounts receivable.Due to the ownerHs failing health the coman' is closing and it e6ects to ma?e no further

a'ments. ournali;e this declaration.4NS6Dec 12th Cash 2#5.$$

)llowance for Doubtful )ccounts 2#5.$$)ccounts eceivable - /anc' 7heels and ires 55$.$$


1!. On une 3$th the coman' has a credit balance of =2#"2#5.$$ in its allowance for doubtfulaccounts. )n evaluation of accounts receivable indicates that the roer balance should be

=31"$25.$$. ournali;e this recognition.4NS6un 3$th :ncollectible )ccounts &6ense 3"#5$.$$

)llowance for Doubtful )ccounts 3"#5$.$$D/0 &as' O0 $%-$4,)0 ))C )nal'tic )C*) /,-(easurement

1#. 9ood Da' ervice Center received a 12$-da'" !> note for =5$"$$$" dated )ril 12 from acustomer on account.

@aA Determine the due date of the note.

@bA Determine the maturit' value of the note.@cA ournali;e the entr' to record the receit of the a'ment of the note at maturit'.

4NS6

@aA )ugust 1$ determined as follows0

)ril 1% da's @3$-12A(a' 31 da'sune 3$ da'sul' 31 da's)ugust 1$ da's

otal 12$ da's

@bA =51"$$$ N=5$"$$$ M @=5$"$$$ 6 !> 6 @12$+3!$A

@cA)ug. 1$ Cash 51"$$$

,ote eceivable 5$"$$$ nterest evenue 1"$$$


33/42


D/0 (oderate O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement O*0 &6amle &6ercise %-5

1%. Calculate the following0

@aA f the interest on a note is =5$$" the interest rate is !> and the time is !$ da's" whatis the rincial

@bA f the rincial of a note is =3$"$$$" the interest is =5$$ and the time is !$ da's"what is the interest rate

4NS6

@aA =5$"$$$ @=5$$ P 3!$+!$A Q .$!@bA 1$> @=5$$ Q =3$"$$$A P @3!$+!$A R 1$>

D/0 &as' O0 $%-$#


18. Determine the due date and amount of interest due at maturit' on the following notes0

Origination /ace erm nterest (aturit' nterestDate )mount of ,ote ate Date )mount

@aA (ar 1 =4"$$$ !$ da's 8> SSSSSSSSSS SSSSSSSSSS @bA (a' 15 =8"$$$ 8$ da's %> SSSSSSSSSS SSSSSSSSSS

4NS6

@aA )ril 3$G =!$ R @=4"$$$ .$8A @!$+3!$A

@bA )ugust 13G =1%$ R @=8"$$$ .08) (90/360)

D/0 &as' O0 $%-$#,)0 ))C )nal'tic )C*) /,-(easurement

2$. ased on the following data and using a 3!5-da' 'ear" comute @aA the accounts receivableturnover and @bA the number of da'sH sales in receivables. he industr' average is acollection eriod of once ever' 2$ da's" and the number of da'sH sales in receivablesaverage 1$. @cA Comment on this situation.

12+31+$# )ccounts eceivable" net =8$"$$$

12+31+$% )ccounts eceivable" net =#$"$$$/or the 'ear ended 12+31+$#" net credit sales =1"25$"$$$/or the 'ear ended 12+31+$%" net credit sales =1"!$$"$$$

4NS6

@aA =1"!$$"$$$ Q N@=8$"$$$ M =#$"$$$A Q 2 R 2$@bA =#$"$$$ Q @=1"!$$"$$$ Q 3!5 da'sA R 15.8# da's@cA his situation is better than the industr' average.


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D/0 (oderate O0 $%-$#,)0 ))C )nal'tic )C*) /,-(easurement

1ROB5E

1. /or a business that ma?es advance rovision for uncollectible receivables

@aA ournali;e the entries to record the following0@1A ecord the adjusting entr' at December 31" the end of the fiscal 'ear" to

rovide for doubtful accounts. he accounts receivable account has a balanceof =%$$"$$$" and the contra asset account before adjustment has a debitbalance of =!$$. )nal'sis of the receivables indicates doubtful accounts of=2$"$$$.

@2A n (arch of the following fiscal 'ear" the =55$ owed b' /la?e Co. on accountis written off as uncollectible.

@3A &ight months later" =2$$ of the /la?e Co. account is reinstated and a'ment ofthat amount is received.@4A n October" =4$$ is received on the =!$$ owed b' Doe Co. and the remainder

is written off as uncollectible.@bA ased on the data in @aA @1A above" what is the net reali;able value of the accounts

receivable as reorted on the balance sheet as of December 31@cA )ssuming that the business had been following the direct write-off rocedure in

accounting for uncollectible receivables" journali;e the entries to record thefollowing0@1A ecorded the write-off of account of /la?e Co. N@aA @2A above.@2A einstated account of /la?e Co. for =2$$ and recorded a'ment of that

amount received N@aA @3A above.@3A ecorded the receit of =4$$ from Doe Co. in @aA @4A above and wrote off theremainder owed as uncollectible.


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4NS6

@aA@1A :ncollectible )ccounts &6ense 2$"!$$

)llowance for Doubtful )ccounts 2$"!$$

@2A )llowance for Doubtful )ccounts 55$ )ccounts eceivable-/la?e Co 55$

@3A )ccounts eceivable-/la?e Co 2$$ )llowance for Doubtful )ccounts 2$$

Cash 2$$ )ccounts eceivable-/la?e Co 2$$

@4A Cash 4$$

)llowance for Doubtful )ccounts 2$$ )ccounts eceivable-Doe Co !$$

@bA =#%$"$$$ @=%$$"$$$ - =2$"$$$A

@cA@1A :ncollectible )ccounts &6ense 55$

)ccounts eceivable-/la?e Co 55$

@2A )ccounts eceivable-/la?e Co 2$$ :ncollectible )ccounts &6ense 2$$

Cash 2$$ )ccounts eceivable-/la?e Co 2$$

@3A Cash 4$$:ncollectible )ccounts &6ense 2$$ )ccounts eceivable-Doe Co !$$

D/0 (oderate O0 $%-$3 $%-$4 $%-$#,)0 ))C )nal'tic )C*) /,-(easurement


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2. he aging of /reedom ales is shown below. Calculate the amount of each eriodicit' rangethat is deemed to be uncollectible. he )llowance for Doubtful )ccounts carries a creditbalance of =1"135.$$. 7rite the adjusting entr' for the end of the current 'ear.

&st :ncollectible )ccts)ge nterval0 alance0 *ercentage0 )mount0

,ot ast due #5$"$$$ 2.5$>

1T3$ da's ast due0 4#"5$$ 5.$$>

31T!$ da's ast due0 21"#5$ 1$.$$>

!1T8$ da's ast due0 11"25$ 2$.$$>

81T1%$ da's ast due0 5"$!5 3$.$$>

1%1T3!5 da's ast due0 2"5$$ 5$.$$>

Over 3!5 da's ast due0 1"145 85.$$>

otal0 %38"21$

4NS6

&st :ncollectible )ccts

)ge nterval0 alance0 *ercentage0 )mount0

,ot ast due #5$"$$$ 2.5$> 1%"#5$.$$

1T3$ da's ast due0 4#"5$$ 5.$$> 2"3#5.$$

31T!$ da's ast due0 21"#5$ 1$.$$> 2"1#5.$$

!1T8$ da's ast due0 11"25$ 2$.$$> 2"25$.$$

81T1%$ da's ast due0 5"$!5 3$.$$> 1"518.5$

1%1T3!5 da's ast due0 2"5$$ 5$.$$> 1"25$.$$

Over 3!5 da's ast due0 1"145 85.$$> 1"$%#.#5

otal0 %38"21$ 28"4$#.25

Dec 31 :ncollectible )ccounts &6ense 2%"2#2.25 )llowance for Doubtful )ccounts 2%"2#2.25

Calculation of e6ense0 )mount of calculated uncollectible accounts =28"4$#.25Eess credit balance of account 1"135.$$)dditional credit amount to establish calcHdvalue

=2%"2#2.25

D/0 Difficult O0 $%-$4



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3. (r. * issued a 8$-da'" #> note for =2$$"$$$" dated /ebruar' 3rd to U7V Co. on account.@aA Determine the due date of the note.@bA Determine the interest.@bA Determine the maturit' value of the note.

@cA ournali;e the entr' to record the receit of the note b' U7V Co.@dA ournali;e the entr' to record the receit of a'ment of the note at maturit' b' U7VCo.

4NS6

@aA (a' 4

/eb 4 - /eb 2% 25 da's(arch 31 da's)ril 3$ da's(a' 4 da's

8$ da's

@bA nterest R /ace )mount @or rincialA P ate P ime

nterest R =2$$"$$$ .07 90/360

nterest R =3"5$$

W@cA (aturit' Ualue R /ace )mount M nterest(aturit' Ualue R =2$$"$$$ M 3"5$$(aturit' Ualue R =2$3"5$$

@dA Cash 203,500

,otes eceivable 200,000

nterest evenue 3,500


4. East Da' ervice Center received a 8$-da'" !> note for =5$"$$$" dated (arch 12 from acustomer on account.

@aA Determine the due date of the note.

@bA Determine the maturit' value of the note.@cA ournali;e the entr' to record the receit of the a'ment of the note at maturit'.


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4NS6

@aA une 1$ determined as follows0(arch 18 da's @31-12A)ril 3$ da's

(a' 31 da'sune 1$ da'sotal 8$ da's

@bA =5$"#5$ N=5$"$$$ M @=5$"$$$ !> @8$+3!$A

@cAX

une 1$ Cash 50,750

,ote eceivable 50,000

nterest evenue 750

D/0 (oderate O0 $%-$!,)0 ))C )nal'tic )C*) /,-(easurement

5. 7olfe Coman' issued a !$-da'" %> note for =15"$$$" dated )ril 5" to Eamb Coman' onaccount.

@aA Determine the due date of the note.@bA Determine the maturit' value of the note.@cA ournali;e the entries to record the following0

@1A receit of the note b' the a'ee" and@2A receit b' the a'ee of the amount due on the note at maturit'. ound answers

to the nearest =1.

4NS6

@aA une 4

@bA =15"2$$

@cA ,ote eceivable-7olfe Co 15"$$$ )ccount eceivable-7olfe Co 15"$$$

Cash 15"2$$ ,ote eceivable-7olfe Co 15"$$$ nterest evenue 2$$

D/0 &as' O0 $%-$#,)0 ))C )nal'tic )C*) /,-(easurement


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!. On the basis of the following data related to assets due within one 'ear for 7all' Co."reare a artial balance sheet in good form at December 31" 2$$5. how total currentassets.

Cash =125"$$$,otes receivable 5$"$$$)ccounts receivable 2#5"$$$)llowance for doubtful accounts 25"$$$nterest receivable 1"$$$

4NS6

7all' Co.alance heet

December 31" 2$$5

)ssetsCurrent assets0 Cash =125"$$$ ,otes receivable 5$"$$$ )ccounts receivable =2#5"$$$ Eess allowance for doubtful accounts 25"$$$ 25$"$$$ nterest receivable 1"$$$ otal current assets =42!"$$$

D/0 &as' O0 $%-$#


#. ournali;e the following transactions0

(ar. 1 eceived a 8$-da'" 1$> note for =3!"$$$" dated (arch 1" from ur?e Co. onaccount.

(a' 3$ he note of (arch 1 was dishonored.Dec. 11 )cceted =33"$$$ in full settlement of the amount owed on the note

dishonored on (a' 3$. he allowance method of accounting for uncollectiblereceivables is used.


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4NS6

(ar. 1 ,otes eceivable 3!"$$$.$$ )ccounts eceivable-ur?e Co. 3!"$$$.$$

(a'. 3$ )ccounts eceivable-ur?e Co. 3!"8$$.$$ ,otes eceivable 3!"$$$.$$ nterest evenue 8$$.$$

Dec. 11 Cash 33"$$$.$$ )llowance for Doubtful )ccounts 3"8$$.$$ )ccounts eceivable-ur?e Co. 3!"8$$.$$

D/0 (oderate O0 $%-$4 $%-$#,)0 ))C )nal'tic )C*) /,-(easurement

%. he following are the current assets from La' Co. as of December 31" 2$$#0

)ccounts eceivable 42"$$$

)llowance for Doubtful )ccounts 3"$$$

Cash #4"$$$

nterest eceivable 3"5$$

(erchandise nventories 1$4"$$$

,otes eceivable 1$$"$$$

*reare the current asset section of the balance sheet.4NS6

La' Co.alance heet

December 31" 2$$#

)ssets

Current )ssets0

Cash = #4"$$$

,otes eceivable 1$$"$$$

)ccounts eceivable 42"$$$

Eess allowance for doubtful accounts 3"$$$ 38"$$$

nterest eceivable 3"5$$

(erchandise nventor' 1$4"$$$ otal Current )ssets 32$"5$$



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8. /or the fiscal 'ears 2$$# and 2$$%" )C Co. reorted the following0

Iear &nded December 31" 2$$# 2$$%

,et ales =44"123"4%! =3!"124"8!1)ccounts eceivable #48"321 #18"3!5

@aA Comute the accounts receivable turnover for 2$$%.@bA Comute the number of da'sH sales in receivable at the end of 2$$%.

4NS6

@aA )ccounts receivable turnover R ,et ales + )verage accounts receivable)ccounts receivable turnover R 3!"124"8!1 + @@#48"321M#18"3!5A+2A)ccounts receivable turnover R 48.18

@bA ,umber of da'sH sales in receivables R )ccounts receivable" end of 'ear+)ve.

dail' sales,umber of da'sH sales in receivables R #18"3!5+@3!"124"8!1+3!5 da'sA,umber of da'sH sales in receivables R #.3


1$. ournali;e the following transactions0

(ar. 1 eceived a !$-da'" 1$> note for =24"$$$" dated toda'" from o' Co. onaccount.

)r. 3$ eceived amount due on note above.)r. 3$ eceived a 8$-da'" 1$> note for =4"%$$" dated )ril 3$" from ear Co. onaccount.

(a' 1$ Discounted the note dated )ril 3$ at hird ,ational an? at a discount rate of1$>.


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4NS6

(ar. 1 ,otes eceivable 24"$$$ )ccounts eceivable-o' Co 24"$$$

)r. 3$ Cash 24"4$$ ,otes eceivable 24"$$$ nterest evenue 4$$

)r. 3$ ,otes eceivable 4"%$$ )ccounts eceivable-ear 4"%$$

(a' 1$ Cash 4"%13.33 nterest evenue 1$.33 ,otes eceivable 4"%$$.$$

D/0 Difficult O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

11. mall Co. received a =1$"$$$" 12>" 8$-da' note" dated October 1" from 7ade Co. onaccount. On October 31" )shle' Co. discounted the note at the ban? at 8>. Determine theitems below and insert answers in the saces rovided.

@aA Due date of note SSSSSSSSSS @bA (aturit' value of note SSSSSSSSSS @cA Discount eriod SSSSSSSSSS da's@dA Discount amount SSSSSSSSSS

@eA *roceeds from discounting note SSSSSSSSSS @fA nterest SSSSSSSSSSSSSSSSSSSSSSSS @insert evenue or &6enseA

SSSSSSSSSS

4NS6

@aA December 3$@bA =1$"3$$@cA !$ da's@dA =15$.$$@eA =1$"15$.$$@fA evenue =15$.$$

D/0 (oderate O0 $%-),)0 ))C )nal'tic )C*) /,-(easurement

Ch08 Receivables

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Transcript of Ch08 Receivables